Limit of what one can earn before taxman gets you

[oldconvent]

My paypal account shows app $19,000 earned to date from Jan.1/17.I have read on the boards here that one can earn up to $20,000.00 before it is reported to Canada Revenue. Question is that in US funds or Cnd funds and also does that include the shipping cost .

Am also wondering if I can sell on behalf of another person and have the money transfer to that person via paypal and how would I do that??

[ypdc_dennis]

you're thinking of the $20,000US sales threshold over on the A-River .com for the IRS

[reallynicestamps]

The $20,000 as I remember is the amount that passes through your PP account in a year.

So it does include shipping costs which were paid by your customers.

However, since you kept careful records of your expenses, including your own postage and packaging costs, as well as eBay and PP fees, the taxable amount, if any, would be lower.

[oldconvent]

The thing here is that I do not want to claim any income as it may have negative effect on my CPP & OAS plus medicare and BC health costs of $50 plus /mth.Years back this wasn't a problem for me as I did run ebay and other things as a business.

[reallynicestamps]

Sorry, love.

If you are earning any income (above occasional garage sale levels) you have to report it and pay taxes on it.

But in effect the first $17,000 or so of your income is tax-free once you add up the deductions, so you may as well report it and not have the fear of an audit hanging over your head.

If your only other income is CPP and OAS, you should be well under that 'tax-free' limit. It may be time to talk to an accountant about your financial planning in retirement.

[tobyshitzu]

It was $20,000 in sales that was agreed upon after ebay lost the court case with CRA to disclose sales info.  that has nothing to do with if one is taxbale or not.  If you are selling for a profit, the net is income from the first dollar.   If you were selling off your own stuff, sales could be way over $20k with no tax implication at all.  $30k of business sales would require hst registration.   Of course $20 in gross sales, after cost of item, ebay fees, postage, etc would be a lot less net.   CRA getting the ebay report doesnt tell them anythign about if or how much is taxbale, it just gives them something to potentially look into if they choose to

[femmefan1946]

The 'garage sale' thing-- means that if you are selling off your own property, like the rest of us incipient hoarders, then there is no tax question.

But if you are buying for resale, then you are, at least in intention, planning to make a profit. And that profit is taxable.

[cumos55]

The Taxman  is watching

and ... then... they may decide to do a major examination of a specific topic such as online selling.

Or  ... someone may report you.

It does not take much... if  they are looking directly at a specific topic...People will make a mistake in assuming that CRA is not looking.  CRA learns how to create red flags....  and then what.....  the taxpayer is caught.

I know of several sellers ... online and otherwise  that fly under the radar.......  The only problem with this is CRA is always looking for red flags.....  and when they do find those flags....  They look back atleast six years....and if you owe tax from 6 years ago... it can hurt....

[cumos55]

Things of interest....

(1) It used to be that if a Canadian seller had more than $10,000 sales in a year eBay had to report this seller to CRA

(2) This number eventually changed to $20,000.... This is sales..... and does not include postage

(3)  For eBay sellers, one has to register to collect GST/HST if sales PLUS postage is greater than $30,000 each year.....Sales  includes all sales,  to Canadian buyers and to international buyers.

(4) Why is postage included in this total of $30,000?   A buyer pays an invoice that contains sales plus postage  and this number is income to a seller.  It is the seller that buys postage, this postage is a deductible cost.

(5) For US sellers it is Paypal that reports sellers with more than $20,000 in sales plus postage to US IRS......  This is a contrast to Canada where the reporting is more $20,000 in sales, and only sales.

The most important part of taxation is that...

In the short run a seller could survive if sales are not reported  and if CRA is not looking.

In the long run   a seller wins if they report all sales... because the more you sell, the more visible you become,,, Not reporting business income creates a red flag.

Flying under the radar  is a reality... but when that radar level drops... the first thing a seller loses is their head.....  the pain of having to explain things to CRA.....  and above all it will hurt more than reporting things from Day 1 of selling on eBay....and elsewhere....

In today's technological age... it is very easy... almost too easy to track what is happening....  

and... We as eBay sellers are online... daily

and..... Who is watching us Online?  

[cumos55]

A question about taxation has been put up on eBay.

Is CRA watching??

[pierrelebel]

".I have read on the boards here that one can earn up to $20,000.00 before it is reported to Canada Revenue. "

Do NOT believe everything you read on the boards.

As far as CRA is concerned ALL profit (starting at $1) must be reported on your annual tax return on line 135.

No ifs and buts about it.

If your annual worldwide revenue (sales and shipping charges) exceed Cdn$ 30,000 you MUST register with GST/HST and remit taxes on sales to Canadian addresses.

That is the law.

I strongly suggest you consult a competent accountant familiar with mail order and your personal circumstances.

[cumos55]

If you buy something to sell, whether sold online or elsewhere ... You are running a business.

There are costs to selling on eBay....  running a business on eBay

Profit  is the amount  you have after costs are deducted.  It is important to know which costs can be deducted.. in your situation specifically

You may start small   but then  a business grows

Profit is taxable...whether you have a small or larger than large business

For someone new to selling,  dealing with Canada Revenue Agency (CRA) can be daunting....  

Find an expert,  and ask  questions....   and then read what CRA says online ... and continue to ask questions.

Never assume you know it all...  There is always something new to learn

[pierrelebel]

cumos55 - "Is CRA watching?? "

Yes.

I am personally aware of CRA acting against a Canadian eBay seller following his posts here.

Many years ago, CRA went to court against eBay who refused at the time to identify sellers with a predetermined level of sales. eBay  wanted to protect the privacy of its sellers.  eBay lost in court and agreed to cooperate with CRA.

The extent of the cooperation in Canada is unknown.  Since PayPal was owned by eBay at the time, I suspect the deal included PayPal.

Things are different in the USA where PayPal reached a different deal with IRS.

e-commerce is growing and governments everywhere want their share of the profit!

[oldconvent]

Thank you all for very good info and suggestions,will take all into consideration going forward

[recped]

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@pierrelebel wrote:

cumos55 - "Is CRA watching?? "

Yes.

I am personally aware of CRA acting against a Canadian eBay seller following his posts here.

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Was it Dexter or the Stamp/Coin guy?

[cumos55]

CRA is constantly vigilant...

Did a search on the internet... about those that choose not to pay taxes...

Either CRA finds them... especially if they are BIG...  or tax evaders can be reported.... more specifically  if they are small.

Then there is an underground economy ....  where the payment is cash  and there is no paper record of a transaction.  This underground commerce appears to be quite big and difficult to track

Also there used to be a problem with a trade...  You do this for me and I do that for you..

[rose-dee]

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@cumos55 wrote:

Also there used to be a problem with a trade...  You do this for me and I do that for you.. 

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Yes, I think the barter economy (as small as it may be) has always been a bit of a thorn in CRA's side.  

Strictly speaking, I believe even barter arrangements must be reported (presumably because there may be uneven monetary consideration on the two sides), although exactly how the reporting is done is unclear to me.  In doing some research to prepare my returns this year, I happened across a reference in CRA's material about reporting barter.  I don't have the time to go back and find it again now, but I wouldn't be surprised if this requirement has been the case for a very long time. 

One thing that may not have been mentioned here is that I believe there is a certain allowance for the sale of personal goods (i.e. items originally purchased for personal use) that is permitted by CRA to be sold before tax accrues.  However, the threshold isn't very high -- something like $2,000 or $3,000 if I remember correctly.  I agree with others that the OP needs to talk to a qualified accountant before making assumptions about what is and isn't taxable in their particular situation.  There are also deductions or allowances that an accountant may be aware of that the seller was not claiming, and can benefit from.  

I also heartily endorse the idea of reporting everything, every year.  It's better to bore CRA with repetitive reporting of a small bottom line profit than to suddenly be informed you have a tax liability (including frighteningly high accrued interest and penalties) after several years of non-reporting.  

Avoiding reporting (i.e. avoiding paying tax) has a darker, selfish side too, in my opinion.  The penalties for tax evasion aside, and ignoring the argument over whether taxation per se is a good or bad system, or how exactly the tax revenue pie should be divided, ultimately our tax dollars do go to pay for services that we receive or benefit from as a whole as citizens (at least in this country).  

As just one example, all we have to do is look at the incredible mess that health care in the U.S. has become to be thankful our taxes go to protect our health.  When was the last time you had a hospital stay and simply walked out the door, free of worry about bills chasing you afterward, free to focus on getting better?  It doesn't take too many of those services in a lifetime to balance out a lot of what you've paid in income tax.